We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

INSURANCE EUROPE RESPONDS TO EUROPEAN COMMISSION CONSULTATION ON FINTECH

EIOPA SIGNS OPERATIONAL MEMORANDUM OF UNDERSTANDING WITH THE WORLD BANK

EIOPA PUBLISHES ITS ANNUAL REPORT 2016

EIOPA PUBLISHES NEW Q&As ON COMMISSION IMPLEMENTING REGULATIONS AND ON THE DELEGATED REGULATION

EIOPA CALLS FOR FURTHER IMPROVEMENT IN ORSA IMPLEMENTATION

PRESIDENT OF EUROPEAN INSURANCE AND REINSURANCE FEDERATION CALLS FOR MORE "DIGITAL-FRIENDLY" INSURANCE RULES

EIOPA PUBLISHES FIRST SET OF SOLVENCY II STATISTICS ON EU INSURANCE SECTOR

IN DOMESTIC NEWS...

FINANCIAL SERVICES AND PENSIONS OMBUDSMAN BILL 2017

On 10 May, the Department of Finance published the Financial Services and Pensions Ombudsman Bill 2017 and Explanatory Memorandum. The draft legislation proposes to amalgamate the offices of the Financial Services Ombudsman and Pensions Ombudsman and will also consolidate and update the legislation in relation to the role and functions of the Ombudsman and the consumer complaints procedure in relation to pensions and financial products.

The Financial Services and Pensions Ombudsman Bill 2017 and Explanatory Memorandum are here.

The Department of Finance's press release is here.

NEW RULES OF COURT RELATING TO THE PERSONAL INJURIES ASSESSMENT BOARD (PIAB)

in Iris Oifigiil in May. Both sets of rules came into effect on 1 June 2017.

Under both sets of rules, proceedings being brought before the Courts must include on the indorsement of claim, a statement confirming whether or not the proceedings have been authorised by the PIAB.

The new rules of the Superior Courts require the plaintiff or defendant (as the case may be) to include in the pleadings all matters that show the action is not maintainable, or that the case is void on a point of law. Both parties must include all grounds of defence or reply that would be likely to take the opposite party by surprise, or would raise issues of fact arising out of the preceding pleadings.

The new rules of the Superior Court are here.

The new Circuit Court Rules are here.

CENTRAL BANK PUBLISHES ANNUAL REPORT AND PERFORMANCE STATEMENT

On 3 May, the Central Bank published its Annual Report 2017 and its Annual Performance Statement Financial Regulation 2016-2017. The Annual Performance Statement summarises the Central Bank's financial regulatory activities during 2016 and those planned for 2017. Certain key activities carried out in 2016 and action points for the remainder of 2017 of interest to the insurance industry were highlighted:

Insurance Supervision: The Central Bank will be increasing its oversight of (re)insurance branches through onsite inspections aimed at assessing whether controls, governance and risk management operate as they have been described by their head offices. Business model sustainability and stress testing are among the Central Bank's supervisory priorities for 2017. The Central Bank will focus on how boards identify and develop appropriate strategies to deal with changing markets and will also look at the level of priority given by insurers to stress testing as part of the ORSA process.

Consumer Protection: The Central Bank's review of the Minimum Competency Code is due to be completed this year and will

include additional measures required by EU legislation. The Bank will conduct a series of targeted Consumer Protection Risk Assessments throughout 2017, with a particular focus on culture, performance management, sales incentives and product oversight and governance. A discussion paper on the impact of Fintech on the delivery of products and services to consumers will also be published before the end of the year.

Payment of Commission to Intermediaries: Following the Central Bank's 2016 discussion paper on the payment of commission to intermediaries, a further discussion paper is planned for 2017 that will outline proposed measures to strengthen protections for consumers in this area.

The Central Bank of Ireland Commission has approved the restructuring of the Central Bank's financial regulation functions. The restructuring is designed to place a clear emphasis on consumer and investor protection, the orderly operating of financial markets and other areas that form part of the Central Bank's financial conduct mandate.

Financial regulation functions will now be organised under two pillars:

Prudential Regulation, which will include the directorates for credit institutions, insurance, and asset management supervisions; and

Financial Conduct, which will include the directorates for consumer protection, securities and markets supervision and enforcement.

The Policy and Risk Directorate will support both pillars; though it will be under the Financial Conduct pillar for administrative purposes. The configuration of the senior management team is changing

to fit the new structure, with both pillars to be led by members of the Governor's Committee, reporting directly to the Governor of the Central Bank. According to the Central Bank, the changes are the result of its expanded supervisory mandate, which has led to more intrusive supervisory methods, and increased level of European engagement.

The Central Bank's press release is here.

CENTRAL BANK PUBLISEHES DISCUSSION PAPER ON THE CONSUMER PROTECTION CODE AND THE DIGITALISATION OF FINANCIAL SERVICES

On 29 June, the Central Bank published a Discussion Paper on the Consumer Protection Code (CPC) and the Digitalisation of Financial Services. The increased use of technology and the rise of digital innovation in the provision of financial services raises a number of issues for how financial products and services are provided, particularly in relation to the CPC. The Discussion Paper examines six key areas of the CPC where consumer benefits and risks arise from digitalisation:

The Discussion Paper marks the beginning of a four-month consultation period seeking views from interested parties, including consumers and regulated financial service providers. Specifically, the Central Bank is seeking views on: whether consumers are adequately protected under the CPC; if the CPC needs to be enhanced in the specific areas mentioned above; and whether there are impediments in the CPC to firms adopting technologies that may be beneficial to consumers. To inform the content of the Discussion Paper, the Central Bank has issued a survey to firms seeking information on the innovative products and services that have been offered or are in development in the Irish market for consumers in the digital financial services context.

The Central Bank has issued new guidelines setting out the requirements for obtaining authorisation as an Irish (re)insurer under Solvency II. The 2017 guidelines closely follow those issued in 2012, (which continue to apply to nonSolvency II applicants). However, under the 2017 guidelines, the Central Bank will also have regard to the applicant's ORSA when evaluating applications.

At a recent Banking Payments Federation of Ireland event, the Central Bank's Director of Enforcement, Derville Rowland, stated that the Central Bank expects firms to carry out money laundering and terrorist financing risk assessments specific to their business, noting that simple "tick box" approaches are not considered acceptable. Ms Rowland's speech, which was primarily aimed at the Banking sector, noted that a recent Central Bank review identified the following as areas of concern in relation to AML compliance:

failure to ensure the provision of appropriate and comprehensive training to board and committee members, as well as enhanced training for staff in key AML/CFT roles;

arthurcox.com

failure to report suspicious

transactions without delay; and

shortcomings in customer due

diligence processes, including the

identification of Politically Exposed

Persons.

In relation to the Central Bank's AML supervisory framework, Ms Rowland noted that the Financial Action Task Force (FATF) had recently conducted a peer review of Ireland's AML framework including supervision and compliance measures. The draft FATF report, which is due to be adopted at the FATF's plenary later this month, contains constructive recommendations that are expected to further strengthen the Irish AML system.

made on the basis of regulatory or supervisory divergences between EU member states, i.e. regulatory arbitrage. The Central Bank has been actively engaged with European Authorities, including the European Central Bank and the European Supervisory Authorities, to address the question of the definition of "substantive presence", so as to limit the risk of regulatory arbitrage and according to the Central Bank, good progress has been made in this regard. The Central Bank expects further guidance to be issued from European authorities on the matter.

Ms Rowland concluded by stating that risk based supervision of compliance with AML legislation remains a priority for the Central Bank and that it will continue to take enforcement action in cases of noncompliance. In the past eight months, three retail banks have been fined a total of 8.75 million for non-compliance with anti-money laundering legislation.

In a speech given on 22 June to the Federation of International Banks in Ireland, Gerry Cross, the Central Bank's Director of Policy and Risk, discussed regulatory challenges in a time where "elevated levels of uncertainty" is the "new normal". Against this landscape, Mr Cross made some interesting observations on the role of regulation, the post-crisis framework, and Fintech.

Of particular note is Mr Cross' observations on Brexit. The main issue involving Brexit, he said, is the relocation of activities from the UK and ensuring that the decisions of relocating firms are not

On 22 June, at a seminar run by Milliman, the Central Bank's Director of Enforcement, Derville Rowland, provided a number of interesting insights and statistics in relation to enforcement in the insurance sector. Ms. Rowland noted that since 2010, 40% of all administrative sanction cases concerned the insurance industry.

To achieve the Central Bank's governance objectives, the Enforcement Directorate works in lock-step with the Central Bank's supervisory teams. Ms. Rowland also addressed the cross-border and multijurisdictional element of enforcement, stating that in such cases, the Central Bank works closely with its international colleagues to investigate suspected wrong doing and, where appropriate, impose sanctions. Two reoccurring themes in enforcement cases were also discussed. The first relates to lack of effective board oversight of governance systems. The executive board must ensure that adopted policies and procedures are actually implemented and adhered to. The second theme concerns the failure to place consumer protection at the heart of a firm's business model. Practical examples of where both themes were evident in enforcement actions taken by the Central Bank were also discussed.

On 8 June 2017, the European Commission adopted Delegated Regulation 8.6.2017 amending Solvency II Delegated Regulation EU 2015/35 concerning the calculation of regulatory capital requirements for certain categories of assets held by insurance and reinsurance undertakings (infrastructure corporates). The amendments proposed by the Delegated Regulation would reduce the capital charges associated with investments by (re)insurers in infrastructure where certain criteria is met, thereby reducing the barriers that currently exist in respect of such investment opportunities. If approved by the Council of the EU and the EU parliament, the Delegated Regulation will enter into force the day after it is published to the Official Journal.

On 29 June, the EU Commission published a draft legislative proposal for the implementation of a Pan-European Personal Pension Product (PEPP). The aim of the PEPP is to increase both the share of the population with private pensions and the allocation of funds to long-term investments.

arthurcox.com

Earlier in the month, Insurance Europe released an insight briefing outlining its views on the EU Commission Proposal for PEPP. Insurance Europe said that it welcomes the PEPP project, but that to be suitable as a source of retirement income it "must truly be a long-term product". It emphasised the importance of incentivising consumers to save for a long period (e.g. by including minimum investment periods). Providing the right incentives for people to save for longer will allow PEPP providers, such as insurers, to invest long-term. It also highlighted a number of other considerations that would be relevant to the success of a PEPP framework, including the importance of appropriate regulation of PEPP providers and favourable tax treatment of PEPPs.

Insurance Europe stated that while consumers must be given the appropriate level of high-quality information relating to the PEPP, the Packaged Retail and Insurance-based Investment Products Regulations (PRIIPs) is not the right method of providing such information and has provided an alternative in the form of a key information checklist. This, is because the PRIIPs indicators are not suitable for pension products, and would "mislead pension savers".

The EU Commission's draft legislative proposal is here.

Insurance Europe's insight briefing is here.

EUROPEAN PARLIAMENT TO CONSIDER MLD5 AT OCTOBER PLENARY SESSION

On 12 June, the European Parliament updated its procedure file for the proposed Fifth Money Laundering Directive (MLD5). MLD5 is now scheduled to be considered at the plenary session taking place from 23 26 October 2017. MLD5 is intended to amend the Fourth Money Laundering Directive, by:

improving access to the beneficial ownership registers of companies and business-related trusts.

The legislative proposal for MLD5 is here.

INSURANCE EUROPE RESPONDS TO EUROPEAN COMMISSION CONSULTATION ON FINTECH

On 15 June, Insurance Europe issued their response to the European Commission's consultation on FinTech. Insurance Europe welcomed the establishment of the Commission's FinTech Taskforce and emphasised the role regulators at EU and national level have in safeguarding consumers, while also supporting and encouraging new technologies and product innovations that benefit consumers.

Insurance Europe put forward a number of recommendations on how regulation could achieve these objectives. These recommendations were grouped under four headings; consumer protection insurance regulation should be activity based to ensure consumer gets the same protection from new entrants/start-ups as established insurers, future-proof rules insurance rules and guidance should be fit for the digital age and policymakers should review existing rules through that lens, support for innovation regulatory sandboxes should be available and open to new entrants and established insurers, and achieving the highest possible levels of cybersecurity clear rules on access to cyber incident data will allow insurers understand them and mitigate against them.

Insurance Europe's position paper is here.

5 | ARTHUR COX

INSURANCE

INSURANCE REGULATORY UPDATE - JUNE 2017

EIOPA SIGNS OPERATIONAL MEMORANDUM OF UNDERSTANDING WITH THE WORLD BANK

On 15 June, EIOPA and the World Bank signed an operational Memorandum of Understanding (MOU) renewing the terms of the MOU signed in 2013 regarding cooperating in the development of the global insurance sector.

The MOU is not binding and does not allow for the sharing of confidential information between the parties. The objectives of the MOU are to:

contribute to the process of promoting a more risk-based regulatory and supervisory framework, and in this respect to the dissemination of knowledge and policy experiences;

contribute to financial stability and identification of systemic risk.

EIOPA and the World Bank intend to collaborate on a number of activities, including joint actions such as knowledge sharing, sharing training materials and organising speakers at events of mutual interest.

The MOU is here.

EIOPA PUBLISHES ITS ANNUAL REPORT 2016

On 15 June, EIOPA published its Annual Report for 2016, which provides a detailed overview of the activities and projects carried out by EIOPA during the course of 2016 with the aim of achieving its supervisory goals, namely: ensuring supervisory convergence, preserving financial stability and reinforcing protection of policyholders and beneficiaries.

The report is assessed by the Board of Supervisors of EIOPA. A list of their observations of EIOPA's activities is set out at page 2 of the report (e.g. they welcome EIOPA's positive contribution in the fields of consumer protection and supervisory convergence). On page 8, a list of EIOPA's top achievements in 2016 is provided, including the monthly calculation and publication of risk-free rates, as well as, for the first time, publishing a report on longterm guarantee measures and measure on equity risk.

In 2016, EIOPA also conducted an EUwide insurance stress test, developed its macro-prudential approach to the low interest rate environment in Solvency II, published its fifth annual report on consumer trends, and provided advice to the European Commission on a number of issues, including the development of a PanEuropean Personal Pension product and advice on the Key Information Document for Packaged Retail and Insurance-based Investment Products. The report also states that convergence of supervisory practices and advancing the European Commission's agenda in areas such as the Capital Markets Union are key priorities for EIOPA for 2017. The report contains helpful annexes, including a full list of EIOPA's opinions and reports published in 2016.

EIOPA's press release is here.

EIOPA's annual report is here.

EIOPA PUBLISHES NEW Q&As ON COMMISSION IMPLEMENTING REGULATIONS L AND ON THE DELEGATED REGULATION

On 15 June, EIOPA published a new set of questions and answers on the Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC.

EIOPA also published two new sets of questions and answers on Commission Implementing Regulations. The first is on (EU) No 2015-2450 with regard to the templates for the submission of information to the supervisory authorities. The second is on (EU) No 2015-2011 with regard to the lists of regional governments and local authorities.

The Q&As can be accessed here and here.

EIOPA CALLS FOR FURTHER IMPROVEMENT IN ORSA IMPLEMENTATION

On 19 June, EIOPA issued a report on its first supervisory experiences regarding the application of the regulation on the Own Risk and Solvency Assessment (ORSA) by (re)insurers. The report is based on the supervisory assessments conducted by the National Supervisory Authorities for the year 2016.

While the majority of (re)insurers have made good progress in implementing the ORSA process, there is a need for greater involvement by the administrative, management or supervisory bodies within (re)insurers in the ORSA process, particularly the board of directors. The ORSA should be evident in their strategic decision-making process.

EIOPA also comments that the scope of risk assessment and risk analysis being undertaken by (re)insurers should be expanded to take into account all material risks, including those that are not quantifiable. The quality of stress testing and scenarios used in the ORSA should also be further improved. Assessments should also be carried out according to each (re)insurer's specific risk profile to avoid overreliance on the standard formula.

EIOPA's supervisory statement is here.

PRESIDENT OF EUROPEAN INSURANCE AND REINSURANCE FEDERATION CALLS FOR MORE "DIGITALFRIENDLY" INSURANCE RULES

On 1 June, during an address at Insurance Europe's 9th International Conference in Zurich, the President of the European Insurance and Reinsurance Federation, Sergio Balbinot, expressed concerns that some of the requirements of new consumer protection rules, such as the Packaged Retail and Insurance-based Investment Products Regulations and the Insurance Distribution Directive, do not reflect the realities of consumer needs. Mr. Balbinot remarked that these new rules require insurers to provide consumers with large amounts of information in paper format, when more consumers are moving towards buying insurance products online or on mobile devices.

arthurcox.com

6 | ARTHUR COX

INSURANCE

Mr. Balbinot pointed out that insurtech, developed in partnership with start-ups, is emerging with new consumer offerings. However, he maintained that policymakers would have to ensure that consumers are as protected when buying insurance products through these new mediums as they would be when purchasing from a traditional insurer.

Insurance Europe's press release is here.

EIOPA PUBLISHES FIRST SET OF SOLVENCY II STATISTICS ON EU INSURANCE SECTOR

On 28 June, EIOPA published its first set of Solvency II statistics on the EU insurance sector, which will be published on a quarterly basis. The statistics are based on the regulatory reporting of almost 3,000 (re)insurers and include aggregated country-level information about the balance sheet, own funds, capital requirements, premiums, claims and expenses of (re)insurers.

Related topic hubs

Compare jurisdictions: Insurance & Reinsurance

“I have found the articles in Lexology/Newsstand to be closely related to the topics I am interested in. The selection feature during registration helps in increasing the relevance of the content of the emails. They’re easy to understand and I appreciate that they are only as long as necessary to cover the essentials. I would recommend it to other attorneys.”